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California’s Laws on Charitable Giving and Your Estate Plan

How Does Charitable Giving Affect Estate Plans?

Estate planning is a strategic move for individuals who want to protect their family’s future and the wealth they worked so hard to earn. The process is not a one-off but an ongoing event incorporating various tools and strategies. One of the crucial strategies is charitable giving to minimize estate taxes while supporting causes you care about.

You may not understand how charitable giving works unless you have the legal guidance of skilled estate planning attorneys in California. Legal experts can help you incorporate the strategy into your plan to realize various benefits, such as:

  • Enabling you to create a legacy through charitable gifts
  • Involve your children and loved ones in teaching them about philanthropy
  • Provide long-term support for charitable organizations
  • Make significant contributions through your estate than during your lifetime

What Are Popular Charitable Giving Strategies for Effective Estate Planning?

Charitable gifting gives you peace of mind because you know how your money will be used and who it will benefit. However, the practice may not be beneficial if you don’t have a defined approach.

Charitable remainder trust lawyers in California explain that there are legal charitable giving strategies you can incorporate into your estate plan to achieve the most out of it. They can help you explore how they work and determine how well they fit into your estate plan:

Charitable Remainder Trust

Charitable Remainder Trusts (CRTs) provide you or your beneficiaries with an income for a specific period, with what remains going to a charity of your choice. California charitable remainder trust attorneys highlight that the plans provide potential tax benefits and a steady income stream. They are beneficial for estate planners with appreciated assets.

One of the outstanding benefits of these trusts is that they provide an immediate tax deduction and help you minimize capital gains taxes on appreciated assets. They can be highly advantageous if you have a high-value real estate or stock portfolio. Your team of legal experts can help you choose between two types of CRTs:

  • Charitable Remainder Annuity Trust that provides fixed payments
  • Charitable Remainder Unitrusts (CRUTs) provide variable payments depending on the trusts’ value.

Bequests in a Trust or Will

One of the simplest yet effective ways to account for charitable giving in your estate plan is to incorporate a bequest in your trust or will. You can leave a specific dollar amount, assets, or a percentage of your estate to your preferred charities. Some types of bequests you can consider incorporating are:

  • Specific bequest that grants a particular dollar amount or asset to a charity
  • Percentage bequest that allocates a percentage of your estate to charity, ensuring the gift remains proportional even if your estate’s value changes
  • Contingent bequest that transfers your assets to a charity only if your primary beneficiaries don’t survive
  • A residuary bequest that transfers the remainder of your estate to charity after the other bequests are fulfilled.

If you choose to incorporate a bequest in your trust or will, estate planning lawyers in California recommend stating the purpose of the funds to prevent them from being directed into “general purposes.” Ensure the charitable entity can fulfill the purpose, or it may not be able to accept the donation. Charitable bequests typically qualify for an estate tax deduction.

Charitable Rollover from IRA

You can donate up to $100,000 annually to charities if you’re 70.5 and above through direct deductions from your IRA account. The arrangement is known as qualified charitable distributions (QCD) and provides several benefits. It also counts as part of the minimum distributions required after an individual reaches a certain age.

Stock Donations

Another approach to charitable giving in estate planning is donating appreciable stock to a charity of your choice. The approach has a tax benefit in that you won’t have to pay taxes on publicly traded stocks that greatly appreciate in value. You will also earn a deduction on the donation.

Charitable remainder trust attorneys in California add that stock donations can also help you avoid capital gain taxes on the appreciation amount. Consult extensively with your team of lawyers to ensure you plan based on legal knowledge and understanding.

Donor-Advised Funds

Donor-advised funds are like charitable savings accounts in which you can contribute to get immediate tax deductions. You can issue donations to chosen charities over time. Donor-advised funds are popular among people seeking to incorporate charitable giving into their estate plans for the following reasons:

  • Immediate tax deduction as soon as you contribute to the fund
  • Flexibility that allows you to contribute now and decide the charities you want to support later
  • Potential for growth as the contributions are tax-free
  • Anonymity as you can donate anonymously if you so desire
  • Legacy planning, where you involve family members in choosing the charities to donate to.

Whichever type of charitable giving you choose, consult with qualified California charitable remainder trust lawyers to ensure your choice aligns with your financial situation and goals. They can also break down the process of incorporating charitable giving into your estate plan.

An Experienced Estate Planning Attorney Providing Legal Guidance on Charitable Giving

Charitable giving is an approach that can help you reduce estate taxes while creating a philanthropic legacy. Depending on your goals and situation, you can use many techniques in charitable giving. Top-notch California charitable remainder trust lawyers can provide legal insights and guidance to help you save money while protecting your assets.

If you’re looking for a legal team to help you create an effective estate plan, The Singh Law Firm has knowledgeable and dedicated estate planning attorneys. We can evaluate your strategy and help you prepare a plan that protects your family and wealth while incorporating charitable giving. Call us at 510-901-5375 to schedule a FREE consultation.

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